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Penn State Behrend economist: GE layoffs 'a bitter pill to swallow'

Company plans to eliminate 1,050 positions

April 16, 2013

Penn State Behrend economist: GE layoffs 'a bitter pill to swallow'

Layoffs at GE Transportation, the largest employer in Erie County, could raise the county’s unemployment rate by 0.6 percent, said Jim Kurre, professor of economics at Penn State Erie, The Behrend College, and director of the Economic Research Institute of Erie.

The impact could be even worse if the slowdown forces cuts at other companies that work with GE, Kurre said. “As it cuts local production, GE will be buying less from local suppliers,” he said. “If, in turn, those companies buy less and cut payrolls, they’ll engender their own ripple effects, resulting in a larger total impact than the initial GE cuts.”

GE plans to eliminate 950 union jobs – a quarter of the union workforce at its Lawrence Park facility – and 100 management positions unless the union offers as-yet-unspecified concessions, company officials told Erie leaders on April 9. The move would affect workers who assemble AC locomotives and large mining-vehicle wheels.

Much of that work would be transferred to a non-union GE plant in Texas. That plant, which is just one year old, is 20 percent more productive than the company’s Lawrence Park facility, company officials said. Lower wages are a big part of that.

“The cold, hard fact is that GE is going to be pushed to find the cheapest, most efficient way to produce their products,” Kurre said. “If two workers are equally productive – both can do the job – but one costs more than the other, the firm will be pushed by competition to go with the less-costly labor. And that’s a bitter pill to swallow.”

The full impact of any cuts is not likely to be seen immediately, Kurre said. Unemployment benefits and a staggered timetable for layoffs could help the region’s economy absorb laid-off workers, he said.

Another advantage: The Erie Leading Index, which tracks the S&P 500, the TS Freight Index and the U.S. interest rate spread, among other factors, continues to show signs of a steady, if slow, recovery. The latest index, which Kurre released last week, is higher than any since 2000.

Until the GE announcement, Kurre saw no evidence that another recession was coming in the next months. And the Erie economy, which has diversified since the 1980s, when GE last had major layoffs, is better positioned to absorb job losses in the manufacturing sector, he said.

“The Erie economy survived the cuts of the 1980s and the loss of more than 15,000 jobs,” he said. “We’ll survive this, too.”